1. Secure Your Business with the ‘0990’ VAT Registration Code
In late January 2026, HMRC introduced a mandatory security layer for all new VAT registrations. This measure was designed to combat a rising wave of “VAT hijacking,” where bad actors attempt to intercept VAT numbers to claim fraudulent refunds.
What is the ‘0990’ Reference?
When you enroll for VAT services through your HMRC online account, you must now include the ‘0990’ reference number. This code acts as a unique identifier that links your registration request to a verified security protocol.
Why This Matters for You
If you are restructuring your business, launching a new UK entity, or registering for VAT for the first time, omitting this code will result in an immediate rejection of your application.
- Action: Ensure your registration paperwork or digital submission includes the 0990 reference.
- Benefit: This prevents criminals from opening accounts in your name, securing your tax identity from day one.
2. Master the £135 Threshold for Direct Sales
The £135 order value threshold remains the most critical “golden rule” for ecommerce sellers importing goods into the UK or selling across borders. Misunderstanding this threshold is one of the most common ecommerce bookkeeping mistakes.
The Breakdown of Responsibility
HMRC splits VAT responsibility based on the intrinsic value of the consignment:
- Orders £135 and Under: You must charge VAT at the point of sale (your website checkout). You are then responsible for reporting and paying this VAT to HMRC through your quarterly returns.
- Orders Over £135: These are subject to standard import VAT and potential customs duties. Typically, the customer pays these fees to the courier before delivery, unless you use a “Delivered Duty Paid” (DDP) shipping model.
Consistency is Key
Using a DDP model provides a better customer experience but requires you to have robust accounting systems to track those import VAT payments. If your customers receive unexpected “handling fee” invoices from DHL or Royal Mail, your brand reputation will suffer.
3. Prepare for the New Making Tax Digital (MTD) Thresholds
Making Tax Digital is no longer a “new” concept, but the requirements are expanding. As of 6 April 2026, the qualifying income threshold for MTD for Income Tax Self Assessment (ITSA) changes significantly.
The 2026/2027 Roadmap
- From 6 April 2026: Self-employed individuals and landlords with an income exceeding £50,000 must comply with MTD rules.
- From 6 April 2027: This threshold drops to £30,000.
Digital Records are Mandatory
HMRC no longer accepts manual spreadsheets or paper records for VAT-registered businesses. You must use HMRC-compatible software that links directly to their systems via an API.
- Keep Digital Links: Every piece of data must flow digitally from your sales platform to your accounting software. Manual “re-keying” of totals into HMRC’s portal is a compliance breach.
- File Quarterly: Ensure your software is set up to handle quarterly summaries to avoid late filing penalties.
4. Don’t Outsource Your Compliance to Marketplaces
If you sell on Amazon, eBay, or Etsy, you might think the marketplace handles everything. While it is true that these platforms act as “deemed suppliers” for VAT collection on many orders, your legal responsibility does not end there.
The “Deemed Supplier” Trap
For non-UK sellers or certain cross-border transactions under £135, the marketplace collects the VAT from the buyer and pays it to HMRC. However, you must still maintain impeccable records.
HMRC regularly audits marketplace reports against your declared business activity. If the data doesn’t match, for example, if you haven’t accounted for stock transfers into UK warehouses, you could be liable for backdated VAT and interest.
- Register for Services: Even if the marketplace collects VAT, you may still need a UK VAT registration to reclaim VAT on your imports or business expenses.
- Monitor Stock: Moving goods into the UK to an Amazon FBA warehouse triggers immediate VAT registration requirements, regardless of your sales volume.
5. Get Ahead of Mandatory E-Invoicing (Roadmap to 2029)
While the full mandate for Standardized Digital E-Invoicing isn’t due until 2029, HMRC is already encouraging businesses to transition. The goal is to eliminate PDF invoices sent via email in favor of data that moves directly between accounting systems.
Why Start Now?
By 2029, every VAT invoice in the UK must follow a specific digital format. Standardizing your processes now will save you from a chaotic transition later.
- Software Integration: Use software that supports the PEPPOL network or similar e-invoicing standards.
- Accuracy: Digital e-invoices reduce human error, ensuring the correct VAT rates are applied every time.
Current VAT Rates Checklist
Always verify you are applying the correct rate to avoid overpaying or underpaying:
- 20% (Standard Rate): Most electronics, household goods, and adult clothing.
- 5% (Reduced Rate): Children’s car seats, certain energy-saving materials.
- 0% (Zero Rate): Most food, books, and children’s clothing.
